Kansas state workers could be furloughed if budget delayed

Topeka  All nonessential state workers will be immediately furloughed if the Kansas Legislature does not pass a budget by June 7 and Gov. Sam Brownback will veto proposals from legislators to increase business taxes, administration officials warned lawmakers Sunday.

Budget Director Shawn Sullivan said during a meeting of GOP senators that the state is not authorized to pay workers beyond June 6 without a budget for the fiscal year beginning July 1 because of state payroll rules.

Revenue Secretary Nick Jordan also announced at the same meeting that the governor intends to veto any proposal to restart income taxes on the profits of business owners and farmers, except for a modest plan outlined by Brownback himself Saturday. The meeting was open to reporters.

The statements marked an aggressive shift in tone from the Republican governor's administration toward the GOP-dominated Legislature. Republican legislators remain sharply divided over how best to close a projected budget shortfall of $406 million in the next fiscal year, and their annual session has become one of the longest ever.

"The governor has said they need to get this job done," said Brownback spokeswoman Eileen Hawley.

The state's budget problems arose after lawmakers cut income taxes in 2012 and 2013 at Brownback's urging in an effort to stimulate the economy. One 2012 policy allowed 281,000 business owners and 53,000 farmers to avoid income taxes on their profits.

Jordan relayed the governor's veto threat and Sullivan disclosed the timetable for furloughs just before the Senate began debating tax policies Sunday.

Senators approved a proposal from some GOP conservatives to drop the sales tax rate to 5.95 percent from 6.15 percent. But they rejected a companion measure to eliminate numerous exemptions to the tax that would have ensured the plan raised new revenues. The targeted exemptions included ones enjoyed by hospitals, blood banks and nonprofit groups including the Boy Scouts.

The debate on tax issues then continued past midnight.

Brownback unveiled a proposal Saturday that would fill the budget gap primarily by raising the state sales tax to 6.65 percent from 6.15 percent, eliminating most personal income tax deductions and increasing the cigarette tax by 50 cents per pack, to $1.29 from 79 cents.

His plan would raise $24 million during the next fiscal year by taxing compensation that business owners guarantee themselves, regardless of their profits. Hawley said it's merely closing a loophole.

Jordan said the governor will veto any stiffer tax increases on business owners.

GOP legislators in both chambers have considered business-tax proposals raising as much as $101 million. Asked whether the veto threat will prevent him from pursuing such plans, Republican Rep. Mark Hutton, of Wichita, said, "Hell, no!"

Hutton said raising business taxes is an "ethical issue." Critics of the exemption have noted that business owners can escape income taxes, while their employees' wages are still taxed.

But Rep. Kasha Kelley, an Arkansas City Republican who wants to preserve the business tax exemption, said the veto threat reinforces a message that the policy is creating economic growth.

"Given the growth we're seeing right now, it only seems appropriate to continue on the path and not turn back," she said.

Sullivan said that the Legislature could pass a short-term budget bill that would give agencies the authority to pay workers past June 6, but "I don't know that anyone thinks that would be a good option."

Republican Sen. Ty Masterson, of Andover, chairman of the budget-writing Ways and Means Committee, said he has already drafted such a proposal but has hoped to avoid needing to consider it.

Sen. Vicki Schmidt, a Topeka Republican, predicted a backlash if state workers are furloughed and agencies are shut down.

"It will hit every community," she said.

Sunday was the 101st day of the Legislature's annual session, 11 more than its leaders traditionally schedule. According to legislative researchers, only two sessions have lasted longer: the 2002 session, at 107 days, and the one in 1991, at 103 days.